Shipyard looking to validate QC - KUAM.com-KUAM News: On Air. Online. On Demand.

Shipyard looking to validate QC

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by Janjeera Hail

Guam - While Naval Facilities Engineering Command is seeking expressions of interest for the lease of 49 acres of the former Ship Repair Facility, the very company subleasing the property is fighting for a qualifying certificate that's already been deemed null and void.

Guam Industrial Services (dba, "The Guam Shipyard") president Mathews Pothen and his attorney appeared before the Guam Economic Development Authority board this afternoon, trying to justify why the qualifying certificate approved by the Gutierrez Administration is legitimate. The Guam Shipyard is looking to validate a qualifying certificate that was deemed invalid by GEDA as the company is hoping to remain in operation and be considered for the Navy's future plans for the ship repair facility.

Shipyard attorney Cesar Cabot told KUAM News, "The QC was signed by former governor Carl Gutierrez back in January 2003. This was also signed by Acting Attorney General Charles Troutman on January 4, 2003, and GEDA's legal counsel on January 3. From the Guam Shipyard's position, we believe this is a valid QC that is legal in all respects."

Pothen applied for the QC back in 2002 and his request sought 100 percent tax relief for corporate income tax for 20 years, 75% corporate dividend tax for 5 years and 100 tax relief for gross receipts taxes for 20 years. The previous board approved the tax breaks with the caveat that the Shipyard employ a minimum of 250 full-time staffers, run an apprenticeship program and increase its monthly rent to GEDA from $8,000 to $15,000. 

The GEDA board never gave final approval of the QC - solely because of major handwritten changes made to the original document by then-governor Gutierrez.  The changes included crossing out key words that means GEDA would have to give the Shipyard more than $1.3 million from the proceeds of the sale of the drydock. The original QC stipulated that GEDA would not have to pay that money.

"Because AMDM8 was never sold and this provision had never become a factor, it had never been executed, had never been carried out," Cabot noted.

Gutierrez also deleted a portion of the agreement, raising the Shipyard's monthly rent from $8,000 to $15,000. Instead, he left the rent at the lesser amount. "And in fact, in May 2006 GEDA and the Guam Shipyard mutually agreed to increase that $8,000 rent to $10,000. So again, the long and the short is that this QC has been honored executed and followed religiously by the Guam Shipyard," the lawyer contended.

The former governor also crossed out the requirement for the shipyard to maintain 250 full-time employees, changing it to read 150 FTEs; but Cabot contends the Shipyard has been maintaining levels beyond 275.

And while the Guam Shipyard is asking GEDA to reconsider the QC, GEDA administrator Tony Blaz made clear the agency's position, saying, "We have three legal opinions that contend that there is no QC."

The QC issue has resurfaced as the Guam Shipyard is working with GEDA to extend its current lease and make a submission to the Navy's request for expression of interest for the lease of the property as GEDA and the Shipyard's leases expire in September 2012. GEDA has told KUAM News that it intends to seek a long term lease as they contend the Shipyard's operator is prevented from making substantial investments in training, equipment and facilities as long as the lease is a short-term one. Whether the board is willing to reconsider the Shipyard's request remains to be seen.

GEDA board chairman Ricardo Duenas said to this end, "I think it would behoove the board to get the perspective of our GEDA staff as to what the status is. And I know we've had some legal opinions regarding the validity so we can review those also at the next board meeting."

KUAM News did try to speak with Pothen directly after the presentation, but he declined an interview.  As for the $4 million owed in taxes, the tax lien remains at the Department of Land Management and Department of Revenue & Taxation officials won't comment on how much, if any of that, has been paid to the Government of Guam.

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